What is NEO - Could it be the ONE...

A Newbies guide to NEO/GAS Crypto Currencies.

I have high hopes for NEO but to understand why you need to have a look at the crypto coin landscape.

Bitcoin

Bitcoin was revolutionary, but possibly not for the reasons you think. Basically it makes it possible to run a distributed ledger (a record of who owns what) across a peer to peer network, where there is consensus (i.e. everyone is in agreement about who owns what).
It doesn't sound that complex, but when you consider many of the nodes making up the network would quite happily behave in any that would most benefit themselves (i.e. lie, hack, steal, corrupt) in order to gain an advantage (i.e. free money).
Without going into to much detail the system relies on the nodes running the network to solve a tricky problem (referred to as Proof of Work). When they find a solution, they get to add transactions to the block chain, and as a reward they get some free bitcoins, these are the bitcoin miners, they make the bitcoin network possible, they are also the reason it will eventually fail (IMHO, but more on that later).
At first Bitcoin operated amazingly well, but as it got bigger, it started to hit scalability issues. The number of transactions that can be processed per block created a bottle neck and as a result it can take a very long time to process a transaction. You can pay more to have your transaction pushed up the queue, but it now cost around $30 just to make your bitcoin transaction happen. So as a day to day currency its pretty much useless. Some of these issues have been worked around, but changes are difficult to make in a peer to peer network.

Ethereum

You can think of Ethereum as Bitcoin 2.0. It solved some of the basic problems with bitcoin; transaction volumes, processing speed, and as its piece de resistance it added the facility to add other stuff to the block chain. By this point there was almost as much interest in the block chain concept as there was in crypto currencies, but more about that in other articles, suffice to say the ability for other applications to add there own data to the block chain opened up a whole load of new potential uses.
The one thing Ethereum did wrong was keep the Proof of Work model for maintaining the block chain.

 So whats wrong with the Proof of Work model

The Proof of work model works by assuming that a bad actor can not control more than 50% of the mining power (processing power) in the system. To incentives the miners they are given a reward for performing the processing, and so as bitcoin prices have risen the number of miners has risen (its a profitable business), the problem is the more miners their are in the system, the harder the problem they are required to solve is. So to stay ahead of the game a miner needs to get more processing power. Now if processing power was free or limited this may not be to much of a problem, but the main cost of running the mining processors is the electricity. And they use a lot. Its estimated that bitcoin mining now consumes the same amount of power as Bulgaria, and costs (including hardware etc) $1,839,752,564 per year to run.

But its worse than that, because as the gap between the cost of bitcoin and the cost of mining widens there is more incentive for miners to buy more processing power (which equates to more electrical power). The following graph shows the predicted energy consumption of bitcoin. Now admittedly this is not going to happen, but you have to ask yourselves WHAT is going to prevent this.

One other interesting point will occur when the cost of mining a bitcoin is higher that the reward for mining it, with the price of bitcoin as it is this is difficult to see that happening, but if mining rises at the rates predicted to or bitcoin crashes, we could get there faster than you think.

So with Bitcoin mining basically being an environment train wreck of a transaction platform that costs $2 billion dollars a year (and rising fast) to run, with transactions taking hours/days to perform, and costing over $30 to perform, and you can start to see cracks.

Sadly Ethereum is also based on Proof of work, and may suffer the same problems, Que NEO.

NEO

You could consider NEO to be Bitcoin 3.0. It takes all the good things from Ethereum, fast, cheap transactions, an open block chain, and solves the excessive mining issues created by 'proof of work'.
NEO does not use proof of work, it uses Proof of Stake, and by that I mean instead requiring 51% of the processing power to bend the network to your evil will, you require 51% ownership of the network, and if you owned 51% of it, damaging the networks reputation in anyway would be counter productive (prices would crash and your 51% would be worthless).

Without going into detail, this is accomplished by having 2 tokens NEO & GAS. GAS is the currency the idea is you can buy and sell stuff with your GAS coins, they are also used to pay for transaction processing costs and are given as a reward for owning NEO tokens. NEO tokens are the proof of Stake, they are the bit that makes the network work, and your reward for simply owning them is 0.0005 GAS tokens per day for every NEO you own. The number of NEO & GAS tokens that will ever be created is limited and the GAS payout per NEO falls off over time.

So it seems to have all the boxes ticked, time will tell!

So should I buy GAS or NEO?

Let me have a quick peek into my crystal ball.....Who knows, logically owning GAS makes more sense, but since when has any of these crypto magic beans made sense.

A bit of balance

• Ethereum's Big Switch: The New Roadmap to Proof-of-Stake - The Ethereum team have been looking into moving to a proof of stake based system
• I Looked Into NEO's Code Base - What I Found Should Worry Any NEO Investor - maybe its not all good news for NEO!